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The News Is Horrible: Here’s Why I’m Buying Stocks Anyway

Every Friday I recap “news you can use” from the week: a handful of quotes from major (and often expensive) news sources, so you can stay up to date on the news that affects your money without spending a dime and in less than a minute.

Here are headlines and quotes from select money stories this week. Check them out, then read on for my stock market outlook.

Amazon’s Split Shouldn’t Mean Much. But It Helped the Stock Anyway. (June 6, Barron’s):

After a 20-for-1 split from Friday’s closing price of $2,447, simple math says the stock should have opened at around $122 each, but it opened and ended the day higher than that.

A split suggests management is confident, and points to underlying financial success.

Target Warns Profit to Drop Due to High Inventory Levels (June 7, Wall Street Journal):

Less than three weeks after reporting a lower-than-expected quarterly profit, Target said Tuesday it has further tempered its profit outlook for the year. Inventory rose 43% in the April quarter as demand for outdoor furniture, small appliances and some electronics declined faster than expected and supply-chain snarls delayed the arrival of many goods past the ideal selling window, Target previously said.

Janet Yellen and World Bank Expect Elevated Inflation to Persist (June 7, Wall Street Journal):

Treasury Secretary Janet Yellen warned that the U.S. is likely facing a prolonged period of elevated inflation, while the World Bank sharply lowered global growth forecasts and flagged a risk of recession in many countries.

Ms. Yellen, speaking Tuesday on Capitol Hill, said that the White House would likely revise upward its U.S. inflation forecast — which already showed prices rising this year at nearly twice the prepandemic rate.

As Gas Prices Near $5 a Gallon, Record Fuel Costs Upend Businesses, U.S. Economy (June 10, Wall Street Journal):

As U.S. gasoline prices approach a record average of $5 a gallon, fuel costs are rippling through almost every corner of business, with signs emerging that the rising expenses are beginning to alter consumer behavior. …

In the short term, a 10% rise in gasoline prices results in a 2% to 3% decline in consumption, said Lucas Davis, an economist at the University of California, Berkeley.

Inflation Climbed More Than Expected. The Fed’s Job Isn’t Over Yet. (June 10, Barron’s):

Consumer prices leapt 1% in May from a 0.3% increase in April, a resurgence in inflation that will intensify pressure on the Federal Reserve to continue its aggressive campaign to tighten monetary policy.

Stock futures tumbled after the report’s release as the mounting inflationary pressures are all but certain to keep the Fed on an aggressive rate-hike path.

My take on the week

Gas is nearly $5 a gallon. High mortgage rates are crushing home sales. Inflation is running rampant.

There have been few times in my 40-year investment career that the economic news was this bad.

One was in the late ’70s/early ’80s, when inflation was out of control, interest rates were ridiculously high and stocks were getting crushed. Another was the dot-com bust of 2000, when the tech industry imploded. A third was the Great Recession of 2007-2009, when housing prices dragged the entire economy down.

And here we are in yet another terrible investing environment.

I started investing in stocks in 1981, when I become an investment adviser. Back then I hadn’t heard, nor would I have understood, investing legend Warren Buffett’s famous quote, “Be fearful when others are greedy and greedy when others are fearful.”

Instead, I, like most investors, did the opposite: Stood like a deer in the headlights when markets were in turmoil, afraid to invest when stocks were low and instead invested when they were high.

Several recessions later, I finally got the message. In 2009, near the market bottom, I loaded up on stocks, many of which I still own today. (You can see every stock I own, along with when I bought and sold each, here.)

Just to be clear, I didn’t know at the time I was buying near the market bottom. That was luck. When I bought in March 2009, I was sure the market was going lower.

As in 2009, I still believe stocks have more downside ahead: Read the news clips above, and you’ll understand why. Nonetheless, as I’ve said in previous columns, I’m going to start buying soon, probably after the next Fed interest rate increase, which should arrive next week.

Here’s my strategy.

I’ve decided on an amount I’d like to eventually add to my stock portfolio and divided that amount by six. That’s the amount I intend to invest monthly. I’ve also been making a list of stocks I want to own and positions I want to add to. (These are also on my portfolio page.) So, for the next six months, I’ll be investing in those stocks monthly, along with any others that catch my eye.

As you know if you’re a regular reader, I invest in individual stocks. Many of you probably don’t, opting instead for broad-based funds and ETFs. That’s fine. The same logic applies. If you’re investing monthly, as within a 401(k) or other retirement plan, you’re already buying at today’s lower prices, which will hopefully pay off when retirement arrives.

Two important notes:

  1. My strategy isn’t set in stone. I may buy more, less or not at all, depending on how things unravel. But I promise to tell you if I’m changing my plans. I’ll also tell you exactly what I’m buying when I do it.
  2. What’s right for me may not be right for you. I’m telling you what I’m doing, not giving you investment advice. I can’t do the latter because I don’t know you or your situation. Do your own research, make your own decisions and, above all, don’t blame me if I’m wrong. It wouldn’t be the first time.

Check out my podcast

I hope having these notes makes your life easier. Want something else that’s concise and impactful? Check out my weekly “Money!” podcasts. They’re brief, casual conversations with news recaps, as well as tips and tricks to make you richer.

You can listen right here on the Money Talks News website, or download them wherever you get your podcasts. Just look for Money! with Stacy Johnson.

Check them out: You’ll be glad you did!

About me

I founded Money Talks News in 1991. I’m a CPA, and I have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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